Editorial, Thekabarnews.com—There’s something brewing in Indonesia’s coffee culture. From Jakarta to Pontianak and Bandung to Makassar, coffee shops are not simply a place to sip coffee. Instead, they are also social spaces, creative spaces, and lifestyle icons for the youthfulurban population.

But behind this front of vigorous growth is an important question. Are these rapidly expanding companies contributing their fair share to the country’s tax system?

In the past ten years, coffee shops have boomed all around Indonesia. Indonesia has experienced an explosion in independent cafés. The Specialty Coffee Association of Indonesia (SCAI) estimates thousands of new locations, particularly since 2018.

The jump comes as domestic coffee consumption is up. The International Coffee Organization (ICO) reports this consumption has been rising steadily. The expansion of Indonesia’s middle class and the shift in urban habits contribute to this growth.

Indonesia is one of the top coffee producers in the world. According to the Food and Agriculture Organization (FAO), Indonesia has been a major coffee producer in the world for a long time. It supplies coffee for the domestic market and the international market.

It’s ironic since output upstream is strong. Yet, downstream firms such as coffee shops and chains are working in a regulatory framework that has not kept up with their expansion.

That is where the tax issue comes in. A cafe is a restaurant. Cafes are normally taxed locally. Some places have up to 10 percent restaurant tax. Furthermore, companies that have reached a specific revenue threshold are also required to comply with the value added tax (VAT). In addition, they must follow income tax legislation issued by the Taxation Directorate General (DJP).

But it’s wrong. The majority of small- and medium-sized coffee shops are informal or semi-casual. This is especially true in metropolitan districts where the barriers to entrance are minimal. The underreporting is due to cash transactions, poor record-keeping, and lack of awareness of tax requirements.

Data from Statistics Indonesia (BPS) also show that the informal sector in Indonesia still accounts for a large share of economic activity. This is a structural problem for tax collection.

It’s a difficulty, but it’s also an opportunity. On the one hand, the government loses money. Tax leakages from high-growth sectors occur. Indonesia’s tax-to-GDP ratio has been low in recent years compared with regional peers, at roughly 10—11 percent. This restricts the government’s ability to support public services and infrastructure.

But if done right, the coffee shop boom is a potential new revenue base. Transactions take place every day at thousands of establishments. A slight increase in compliance can produce large increases in revenue.

Digitalization has a specific significance in this context. The introduction of cashless payments and Point of Sales (POS) systems can enhance transparency. In addition, it can bring down the extent of tax avoidance.

The administration aims to streamline tax administration and promote compliance through electronic tax systems by implementing e-invoicing and digital reporting. But enforcement is not sufficient. Many small business owners perceive taxation as complicated, burdensome, and punishing.

This view reveals a more profound problem. There is also the need for a more balanced strategy that incorporates enforcement as well as teaching and rewards. The final income tax and simplified tax systems for micro and small firms can aid in their formalization.

Regional governments must also prove to taxpayers that they are getting value for their dollars in the form of improved infrastructure, cleaner neighborhoods, and better services.

There’s an economic side to the issue as well. The rise of coffee shops is a sign of the creation of a creative economy in Indonesia, fueled by young entrepreneurs and changing consumer behaviors. Too much control or too much taxation can kill enthusiasm, of course. Policymakers have to balance the growth of those enterprises that produce the highest income.

So the question is not whether coffee businesses should be taxed—they are—but how Indonesia establishes a system where compliance is the rule and not the exception. The system must be transparent, simple, and fair.

In a country as colorful as Indonesia, the coffee shop mania is not a fad but a warning of economic instability. But expansion without responsibility can produce imbalances. These imbalances threaten long-term development.

Properly maintained, this blessing in the culture of Indonesian coffee can be a motivator for sustainable income and economic stability. Otherwise, the taste of opportunity will be the taste of lost opportunity. (Kusnadi Assaini)

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